Trading Plan for August 10, 2012

Pre-market update (updated 7:30am eastern):

• European markets are trading -0.8% lower. 
• Asian markets traded -0.8% lower. 
• US futures are trading moderately lower.  

Economic reports due out (all times are eastern): Import and Export Prices (8:30am), Treasury Budget (2pm)

Technical Outlook (SPX):

• Despite opening lower, SPX managed to finish higher for a fifth straight day, the first time that has occurred since 3/7-3/12. 
• However, the gains that are being made are sluggish at best, and without much fanfare. 
• Volume continues to drop unbelievably lower on SPX. 
• Setting up for a pullback at the very least heading into next week as buyers seem to be lacking conviction at these levels. 
• Market remains well overbought on multiple time frames. 
• For a while, the rally off of the 6/4 lows looked more like a bear-flag forming, but no longer with the strength in the market over the last month. 
• If the SPX is to finish again in the green today, it would be the first 6-day rally since the 12/7/10 – 12/14/10 – to say the least it hasn’t happened in a while. 
• SPX poised to make a move to 1422 and challenge the year’s highs. 
• Biggest news so far this week, technically, has been the SPX breaking out of the descending trend-line off of the 4/2 highs (as noted below). 
• It’s not uncommon to see large market rallies going into an incumbent re-election.
• 30-min chart has us primarily trading in a sideways channel. 
• If you look at the 4 previous higher-highs in the market since the 6/4 bottom, then one could conclude that we’ve reached another temporary top, and are prime for another pullback. 
• One area of concern is the 3 large gaps off of the 6/4 lows that remain unfilled, including 6/6, 7/26, 8/3
• At this point, uptrend support rests at 1354.
• SPX trading above all significant moving averages (10,20,50,200).
• VIX remains under 16.
• If another sell-off were to ensue, watch for a break and close below 1354 for a new lower-low in the market.  
• Downside reversal signal still remains intact on the SharePlanner Reversal Indicator. 

My Opinions & Trades:

• Went short HE yesterday at $28.44.
• Day-traded AHS yesterday and sold at $6.45 from 6.46 for a $0.01 loss. 
• Bought OSK at $23.74. 
• Going to consider any sell-off as opportunities to buy stocks on the cheap. Dip buying should be the norm until a lower-low is put in place.
• Remain long RHT at $56.19, AIG at $32.46, MDT at 38.15 and AMZN at $233.90. Short BRO at $25.65

Charts: